Now That We Know the 'Why' in Bitcoin's Story, What Comes Next?

Do I really have to address Bitcoin again? 

I thought that was behind us. But it seems all those folks who were HODLers are not doing what they said they would. They are simply doing some old-fashioned selling.

I know there is a story about it and why it is down. But that’s the thing. Let me tell you a story.

Three decades ago I sat on the Goldman Sachs trading desk. There was a guy on the desk (Steve) who used to say to me, "Once we know why we’re selling we can quantify it. We can figure out what it’s worth. Until then, we can’t." He meant that when it came to stocks, to the market, to bonds, to currencies, commodities, anything.

Sometimes during big whooshes in the market — for example, mid-October 1989 stands out — there would be a headline that came across the tape and Steve would stand up and scream at me across the trading floor, “Hey Helene, now we know!” He was referring to the fact that now we knew the "why" so we can quantify it.

I realize Bitcoin (which I would remind you I think is garbage as the only real use case I can come up with for it seems to be for criminal enterprises — oh there are a few exceptions, but c’mon…) is not a stock, it is not a market index, I’m not even sure it is a commodity, but at least now we know why we’ve seen all the selling.

And we know that the Daily Sentiment Index (DSI) is at 12. We really could finally see a single-digit reading within days. And now we know why it has been selling off.

Away from that, very few of the indicators changed from Monday’s action. I still think we try and rally again one more time this week to get to that short-term overbought reading.

Then there are the bonds. 

I have been talking about the potential for a head-and-shoulders bottom in yields for a few weeks now. I happened to post this chart on social media on Monday and the pushback I got — almost anger— was interesting. It told me something about sentiment: Folks are long bonds or at least they are banking heavily on a Fed cut this month.

Either way I think that blue line stops any rise in rates but crossing that green line might put a little fear into the bond market. If I am wrong and that blue line does not stop (4.2%) the rise in rates the stock market is not going to like that very much.